May 18, 2024

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The bear market brought “fear and uncertainty” to Generation Z. How do they deal.

The bear market brought "fear and uncertainty" to Generation Z. How do they deal.

Ella Gupta made her first investment when she was 10 years old. With the help of her parents, she earned half of the earnings from her bracelet-making business and invested in the stock market. At 14, Roth opened an IRA, after starting her first job cleaning dental instruments. Now, at 17, Gupta is facing her first bear market.

With the froth out of the stock market, there is also an opportunity to buy shares of high-quality companies for sale. “For younger investors, a market correction or even a bear market can be beneficial for the long-term nest egg, if you have the discipline to stick to and the ability to buy more when the markets are in a state,” says Greg McBride, chief financial analyst at Bankrate. to retreat”.

US stocks haven’t experienced a long-term bear market since the 2008-2009 financial crisis. While the generation of investors who have since come of age may lack the experience of their elders, today’s bear market instigators have advantages that previous generations could not have imagined. Perhaps the most important of these is unrestricted access to information online, the ability to find and publish it almost instantly. Not only has the proliferation of online brokerages and investment websites democratizing investing; It has enabled new and mostly young investors to build communities and share knowledge in new ways.

Gupta invested the money she earned in making and selling Rainbow Lom Bracelets.

Image via Kate Medley

More than half of Generation Z adults – those between the ages of 18 and 25 – are Already investors, with 26% invested in individual stocks, according to the 2022 Investopedia Financial Literacy Survey. This would make them more financially active than any previous generation their age, according to Investopedia. Generation Z-ers are also the first generation to be born into a world where social media use is the norm, Which means that their investment thinking is highly influenced by their peers.

“Peer-to-peer learning is very powerful,” says Gupta, who has also written a book for her peers on personal finance and investing.

Gen-Z survey respondents say they learned about investing online, with just under half saying they learned on YouTube or through other videos. About a third credit TikTok for their newfound knowledge. For most of the past couple of years, following investment advice from social media strategists has been paying off. that Analytics From 2006 to 2020, more than 30,000 stocks worldwide found that stocks with the most positive media sentiment outperformed those with the most negative sentiment, according to market sentiment aggregator MarketPsych.

a alcohol market It can refer to the dangers of groupthink, both on Wall Street and in the digital world. This is something Gen Z-ers are also learning as the meme stock pit falls, cryptocurrency crashes, and other assets boosted by online investment influencers once again. Many stocks have been favored last year on online forums like Reddit since then.

When she turned 14, Gupta used some of her earnings to buy a mother-of-pearl necklace.

Image via Kate Medley

“In a bull market, everyone looks like a genius because they’re like, ‘I make amazing returns on everything,’” says Vivian Tu, creator of financial literacy content on TikTok. “And now, by definition, we’ve hit a bear market. People who haven’t weighed the pros and cons are going to feel it now, which is a scary time if you’re overweight in risky asset classes.”

Even conservative investors suffered losses this year, with

Standard & Poor’s 500

down about 17%. Surveys show that new investors have been much quicker to sell than their more experienced seniors — unlike in many cases they should. A Bankrate survey found that 73% of Generation Z investors are actively trading this year, compared to just 28% of Generation X investors, ages 42 to 57, and 25% of Baby Boomers.

Some experts worry that social media may be responsible for promoting bad investment behaviour. “Lots of stuff on social media is excellent advice; says Ann Lister, former head of retirement at

JP Morgan

“It should be short and easy to digest, so some nuances are lost.”

But concerns about the risky business behavior of Gen-Z may also be exaggerated. There are reasons to believe that this generation will be more financially conservative than its predecessors, after witnessing parents lose their jobs during the financial crisis, and the turmoil caused by the Covid pandemic, according to Wells Fargo Consultants.

Gupta says she didn’t panic about the possibility of a bear market because her investment strategy revolves around cost averaging in dollars, or investing a fixed dollar amount on a regular basis. It also researches which company to buy its stock, and studies financial statements, business conditions, and valuations.

“When I buy a stock, I do so with the intention of holding it for the long term,” she says.

Many novice investors seem to have sharpened their pencils in recent months, says Zoe Barry, CEO of social trading platform Zingeroo. Of all the clients trading on the Zingeroo platform, Gen-Z investor activities closely mirrored the recommendations of professional research firms, she says, noting that few are still buying into meme stock fanfare.

Tu, the creator of TikTok content, agrees. She counts the 1.5 million followers of yourrichbff, her TikTok account, and says that as recession fears grow, her followers are feeling uneasy, burping her with questions about how the current macroeconomic environment is affecting them.

“People talk about it like we’re about to move into our bunkers for three years,” she says.

I assured them that this was not the case.

Write to Sabrina Escobar at [email protected]

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